M/s K.K. Forwarding Agency, Hyderabad V. ITO,Ward 6(3), Hyderabad

ITA 613/HYD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6278 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-08-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Reopening of assessment; Reasonable cause; Tangible material; Validity of assessment; Assessment record
• Section: 143(3); 142(1); 147; 148; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 613/HYD/2014 ASSESSMENT YEAR: 2005-06 M/S KK FORWARDING AGENCY, HYDERABAD. PAN AACFK 8969 Q VS. INCOME-TAX OFFICER, WARD 6(3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.P. RAMASWAMY REVENUE BY : SHRI A. SITARAMA RAO DATE OF HEARING 17-08-2016 DATE OF PRONOUNCEMENT 24-08-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - IV, HYD ERABAD, DATED 11/10/ 2013 FOR AY 2005-06. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A FIRM ENGAGED IN THE BUSINESS OF TRANSPORTING GOODS. IT F ILED ITS RETURN OF INCOME ON 27/10/2005 ADMITTING TOTAL INCOME OF RS. 4,67,363/-. THE ASSESSMENT WAS ORIGINALLY COMPLETED U/S 143(3) OF T HE ACT ON 29/11/2007. SUBSEQUENTLY, THE AO NOTICED THAT THE A SSESSEE HAD RECEIVED RS. 57,66,188/- TOWARDS INCENTIVES FROM MA DRAS CEMENTS LTD., AGAINST WHICH INCENTIVES PAID TO THE LORRY OW NERS WERE CLAIMED AT RS. 43,30,200/-. THE DIFFERENCE OF RS. 14,45,988 WAS OFFERED AS NET INCENTIVES. ON VERIFICATION OF INCENTIVE PAYMENTS O F RS. 43,20,200/- IT WAS NOTICED THAT THERE WERE CERTAIN PAYMENTS EXCEED ING RS. 50,000/-, 2 ITA NO. 613/H/14 M/S K.K. FORWARDING AGENCY, HYD. WHICH WORKED OUT TO RS. 38,46,010/-. ACCORDINGLY, T HE AO REOPENED THE ASSESSMENT U/S 147 AND DISALLOWED THE SAID AMO UNT OF RS. 38,46,010/- U/S 40(A)(IA) AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 43,40,628/-. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) CHALLENGING THE VALIDITY OF ASSESSMENT U/S 147 AND ALSO THE ADDITION OF RS. 38,46,010/- U/S 40(A)(IA). 4. THE CIT(A) UPHELD THE REASSESSMENT MADE BY THE A O U/S 147 OF THE ACT AND ALSO CONFIRMED THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) OF THE ACT. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US RA ISING THE FOLLOWING GROUNDS OF APPEAL: 1) THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS), IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE AP PELLANT, IS AGAINST LAW, WEIGHT OF EVIDENCE AND PROBABILITIES OF THE CA SE. 2) A) THE LEARNED CIT(APPEALS) ERRED IN UPHOLDING T HE REASSESSMENT U/S 144 R/W SEC 147 DESPITE THE FACT T HAT THERE WAS NO FRESH TANGIBLE MATERIAL WITH THE ASSESSING OFFIC ER TO FORM THE BASIS FOR REOPENING THE REGULAR ASSESSMENT COMPLETE D U/S 143(3) ON 29-11-2007. SHE OUGHT TO HAVE ANNULLED THE IMPUG NED REASSESSMENT ORDER. B) THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE TH AT THE ORIGINAL REGULAR ASSESSMENT WAS COMPLETED AFTER DUE VERIFICA TION OF BOOKS OF ACCOUNT AND VOUCHERS PRODUCED AT THAT TIME . CONSEQUENTLY, SHE ERRED IN NOT ANNULLING THE IMPUGN ED REASSESSMENT. 3) WITHOUT PREJUDICE TO GROUND NO.2: A) THE LEARNED CIT(APPEALS) ERRED IN UPHOLDING THE APPLICABILITY OF SECTION 40(A)(IA) ON THE INCENTIVES SHARED BY TH E APPELLANT WITH ITS TRANSPORT OPERATORS WHEN THE BASIC PAYMENT S TO TRANSPORT OPERATORS DO NOT FALL WITHIN THAT SECTION. SHE OUGH T TO HAVE ALLOWED THE CLAIM OF THE APPELLANT. 3 ITA NO. 613/H/14 M/S K.K. FORWARDING AGENCY, HYD. B) THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE TH AT THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE FROM PAYMENTS MADE TO TRANSPORT CONTRACTORS. CONSEQUENTLY, SHE ERRED IN C ONFIRMING THE DISALLOWANCE OF RS.38,46,010/-. SHE OUGHT TO HAVE A LLOWED THE CLAIM. FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THAT M AY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED. 6. LD. AR SUBMITTED THAT THE AO HAS REOPENED THE AS SESSMENT AFTER EXPIRY OF FOUR YEARS WITHOUT PROPER/FRESH TAN GIBLE MATERIAL. ACCORDING TO HIM, THE ASSESSEE HAD SUBMITTED ALL TH E ACCOUNTS AND RELEVANT INFORMATION AT THE TIME OF ORIGINAL ASSESS MENT AND THE AO HAS CHANGED HIS OPINION TO BRING THE DISALLOWANCE U /S 40(A)(IA) OF THE ACT AS THE RELEVANT INFORMATION RELATING TO THIS TR ANSACTION WAS VERY MUCH IN ASSESSMENT RECORDS. HE RELIED ON THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., [2010] 320 ITR 561 (SC). 6.1 IN ADDITION TO THE ABOVE SUBMISSION, LD. AR ALS O SUBMITTED THAT THE INCENTIVE PAID TO THE LORRY OWNERS DOES NOT COM E UNDER TDS PROVISIONS AND ALSO SUBMITTED THAT ALL THE PAYMENTS WERE ALREADY PAID AND THERE IS NOTHING OUTSTANDING AT THE YEAR END LE ADING TO DISALLOWANCE U/S 40(A)(IA). HE RELIED ON THE SPECIA L BENCH DECISION OF THE TRIBUNAL IN THE CASE OF M/S MERLYN SHIPPING TRA NSPORT & OTHERS, 136 ITD 23(SB)(VIZAG) WHEREIN IT WAS HELD THAT ASSE SSING OFFICER CAN DISALLOW ONLY THE EXPENDITURE WHICH IS OUTSTANDING AT THE YEAR END AS THE STATUTE USED THE WORD EXPENSES PAYABLE, IT WILL NOT COVER FOR THE PAID EXPENDITURE. 7. LD. DR , ON THE OTHER HAND, SUBMITTED THAT THE A SSESSEE HAD NOT OBJECTED TO THE REOPENING OF ASSESSMENT U/S 147 BEFORE THE ASSESSING OFFICER AND ALSO ASSESSEE HAD NOT TAKEN T HE MERLYN CASE IN GROUND OF APPEAL. HE RELIED HEAVILY ON THE ASSESSIN G OFFICER AND CIT(A)S ORDERS. 4 ITA NO. 613/H/14 M/S K.K. FORWARDING AGENCY, HYD. 8. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND PERUSED THE FACTS ON RECORD. IT IS NOTED THAT ASSESSEE HAD FILED THE RETURN ON 27/10/2005 AND 143(3) ASSESSMENT WAS COMPLETED ON 2 9/11/2007. THE REASSESSMENT NOTICE U/S 148 WAS ISSUED ON 24/03 /2011, AFTER EXPIRY OF FOUR YEARS FROM THE RELEVANT ASSESSMENT Y EAR. ASSESSING OFFICER CAN REOPEN THE ASSESSMENT BY REASON OF FAIL URE ON THE PART OF THE ASSESSEE TO FILE A RETURN U/S 139 OR FAILURE TO FURNISH RETURN IN RESPONSE TO NOTICE U/S 142(1) OR U/S 148 OR FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THAT ASS ESSMENT YEAR. WE FIND FROM THE ASSESSMENT RECORD THAT THE ASSESSEE H AD NOT RESPONDED OR SUBMITTED ANY ADDITIONAL INFORMATION TO THE ASSE SSING OFFICER BUT STILL ASSESSING OFFICER HAS COMPLETED THE ASSESSMEN T WITH THE INFORMATION AVAILABLE ON RECORD, WHICH CLEARLY DEMO NSTRATES THAT THE ASSESSEE HAD SUBMITTED ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT DURING THE ASSESSMENT PROCEEDINGS U/S 14 3(3) OF THE ACT. SINCE THERE IS NO FAILURE ON THE PART OF THE ASSESS EE, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAD REOPENED THE ASSESSMENT WITHOUT REASONABLE CAUSE. SECONDLY, ALL THE INFORMA TION REQUIRED FOR ASSESSMENT IS VERY MUCH AVAILABLE ON RECORD AND NO COGENT MATERIAL WAS DISCOVERED BY THE ASSESSING OFFICER, AT LEAST N OT BROUGHT ON RECORD. IT CLEARLY SHOWS THAT THE ASSESSING OFFICER HAD CHANGED THE OPINION ON THE ASSESSMENT SUBSEQUENTLY. IT IS EXPEC TED THAT ASSESSING OFFICER TO DEAL WITH THE ASSESSMENT DILIG ENTLY IN THE FIRST PLACE OTHERWISE THERE WONT BE ANY END TO ANY ASSES SMENT. 9. CONSIDERING THE ABOVE DISCUSSION, WE QUASH THE R EASSESSMENT MADE BY THE ASSESSING OFFICER U/S 147 OF THE ACT AN D WHEREIN THE ADDITION U/S 40(A)(IA) OF THE ACT WAS MADE. THEREF ORE, NO NEED TO GO INTO THE MERITS OF THE ADDITION MADE U/S 40(A)(IA) OF THE ACT. 5 ITA NO. 613/H/14 M/S K.K. FORWARDING AGENCY, HYD. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2016. (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 24 TH AUGUST, 2016 KV COPY TO:- 1) M/S K.K. FORWARDING AGENCY, C/O DR. CP RAMASWAM I, ADVOCATE, FLAT NOS. 102 & 303, GITANJALI APTS., PLOT NO. 108, SRINAGAR COLONY HYDERABAD 500 073. 2) IT), WARD 6(3), HYDERABAD. 3) CIT(A) - IV, HYDERABAD 4) CIT - III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.